Core Insights - Paychex reported $1.51 billion in revenue for the quarter ended February 2025, marking a year-over-year increase of 4.8% and an EPS of $1.49 compared to $1.38 a year ago, with a revenue surprise of +0.03% and an EPS surprise of +0.68% over consensus estimates [1] Financial Performance - Average investment balance for funds held for clients was $5.12 billion, exceeding the estimated $4.98 billion [4] - Average interest rates earned on funds held for clients stood at 3.4%, matching the average estimate [4] - Average investment balance for corporate cash equivalents and investments was $1.54 billion, slightly above the $1.50 billion estimate [4] - Average interest rates earned on corporate cash equivalents and investments were 4.3%, below the estimated 4.5% [4] - Revenue from interest on funds held for clients was $42.90 million, surpassing the average estimate of $40.82 million, but reflecting a year-over-year decline of -2.3% [4] - Total service revenue was reported at $1.47 billion, consistent with the average estimate and showing a year-over-year increase of +5.1% [4] - Revenue from PEO and Insurance Services was $365.40 million, slightly below the average estimate of $371.35 million, with a year-over-year increase of +5.8% [4] - Revenue from Management Solutions was $1.10 billion, aligning with the average estimate and reflecting a year-over-year change of +4.8% [4] Stock Performance - Paychex shares have returned -4.6% over the past month, compared to a -2.9% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Performance - Total service revenue for the three months ended February 28, 2025, was $1,466.1 million, a 5% increase from $1,395.4 million in the prior year[106] - Net income for the nine months ended February 28, 2025, reached $1,360.1 million, reflecting a 4% increase compared to $1,310.5 million in the prior year[106] - Adjusted diluted earnings per share for the three months ended February 28, 2025, was $1.49, an 8% increase from $1.38 in the prior year[106] - Operating income for the nine months ended February 28, 2025, was $1,776.6 million, a 5% increase from $1,692.3 million in the prior year[106] - Total revenue for the three months ended February 28, 2025, was $1,509.0 million, a 5% increase from $1,439.3 million in the prior year[106] - Net income for Q3 2025 was $519.3 million, reflecting a 4% increase from $498.6 million in Q3 2024[120] - Adjusted diluted earnings per share rose to $1.49, an 8% increase from $1.38 in Q3 2024[120] - EBITDA for Q3 2025 was $734.9 million, a 6% increase from $694.6 million in Q3 2024[120] Revenue Breakdown - Management Solutions revenue for the three months ended February 28, 2025, was $1,100.7 million, a 5% increase from $1,049.9 million in the prior year[107] - Management Solutions revenue was $1.1 billion for Q3 2025, up 5%, and $3.0 billion for the nine months, up 3%[111] - PEO and Insurance Solutions revenue reached $365.4 million for Q3 2025, a 6% increase, and $1.0 billion for the nine months, a 7% increase[111] Expenses and Income - Total expenses increased 4% to $817.2 million for Q3 2025 and 3% to $2.4 billion for the nine months[112] - Operating income rose 6% to $691.8 million for Q3 2025 and 5% to $1.8 billion for the nine months[114] - Adjusted operating income increased 9% to $708.5 million for Q3 2025 and 6% to $1.8 billion for the nine months[114] Tax and Dividends - The effective income tax rate for the three months ended February 28, 2025, was 24.3%, slightly down from 24.4% in the prior year[107] - Dividends paid to stockholders increased by 10% to $353.0 million for the three months ended February 28, 2025, compared to $320.4 million in the prior year[106] Acquisition Plans - The company plans to acquire Paycor for $4.1 billion, with the transaction expected to close in April 2025[104] - The company entered into a definitive agreement to acquire Paycor for $22.50 per eligible share, with the acquisition expected to close in April 2025[138] - Acquisition-related costs amounted to $16.7 million in Q3 2025, primarily related to the pending Paycor acquisition[117] - Acquisition-related costs recognized for the Paycor acquisition were $16.7 million for Q3 2025[120] Cash Flow and Investments - For the nine months ended February 28, 2025, net cash provided by operating activities was $1,557.1 million, a decrease of $118.9 million compared to the prior year[142] - The company reported net cash used in investing activities of $281.7 million for the nine months ended February 28, 2025, an increase of $163.9 million compared to the prior year[142] - Total corporate investments, including cash and restricted cash, amounted to $1.7 billion as of February 28, 2025[124] - The company has $2.0 billion in unused capacity under unsecured credit facilities as of February 28, 2025[124] - A Bridge Loan Commitment of up to $3.5 billion was established for the acquisition of Paycor, with no borrowings under this commitment as of February 28, 2025[132] Interest Rates and Risks - Average interest rates earned on funds held for clients were 3.4% for Q3 2025, down from 3.5% in the prior year[109] - The average interest rate earned on combined funds held for clients and corporate cash equivalents was 3.7% for the nine months ended February 28, 2025, compared to 3.8% for the prior year[150] - Company is exposed to interest rate risk through recurring credit facilities, which could lead to increased interest expenses if rates rise[160] - As of February 28, 2025, $2.1 billion of AFS securities had fair values below amortized cost, with gross unrealized losses of $79.1 million attributed to interest rate changes[161] Financial Monitoring and Accounting - The company maintains an ongoing monitoring system for financial institutions to minimize potential risk exposure to cash and investment balances[163] - There have been no material changes in critical accounting policies and estimates used to prepare consolidated financial statements[164] - Recent accounting pronouncements have been adopted and discussed in the Notes to Consolidated Financial Statements[165] - Market risk factors are detailed under Management's Discussion and Analysis of Financial Condition and Results of Operations[166] - Key accounting estimates include revenue recognition, goodwill, and impairment of long-lived assets[167]

Paychex, Inc. (NASDAQ:PAYX) Q3 2025 Results Conference Call March 26, 2025 9:30 AM ET Company Participants Bob Schrader - Chief Financial Officer John Gibson - Chief Executive Officer Conference Call Participants Daniel Maxwell - William Blair Mark Marcon - Baird Pete Christiansen - Citi Jared Levine - TD Cowen Bryan Keane - Deutsche Bank Ramsey El-Assal - Barclays James Faucette - Morgan Stanley Will Qi - RBC Capital Markets Kartik Mehta - Northcoast Research Tien-Tsin Huang - JPMorgan Samad Samana - Jeffe ...

Core Viewpoint - Paychex reported mixed earnings results, with a slight beat on earnings per share but a miss on sales, while the stock price increased significantly despite concerns about future profitability [1][2][4]. Group 1: Earnings Performance - Paychex's sales grew by 5% year over year in Q3, while adjusted earnings per share increased by 8%, exceeding expectations [2]. - GAAP earnings per share rose by only 4% to $1.43, indicating slower growth compared to the adjusted figures [2]. Group 2: Acquisition Update - The waiting period for Paychex's acquisition of Paycor has expired without government objection, allowing the acquisition to proceed as planned, with a probable closing in April [3]. Group 3: Future Guidance - Management did not provide specific earnings guidance for fiscal Q4 but indicated that adjusted operating margins increased by 180 basis points to 46.9% in Q3, with expectations of a decline to around 43% in Q4 [4]. - The company maintains its previous guidance for fiscal 2025, forecasting earnings growth of 4% to 5.5% and adjusted earnings growth of 5% to 7%, along with operating margins of 42% to 43% [5][6].

Core Insights - Paychex, Inc. (PAYX) reported strong third-quarter fiscal 2025 results, with earnings and revenues exceeding the Zacks Consensus Estimate [1][2] Financial Performance - Fiscal third-quarter earnings were $1.49 per share, an 8% increase from the previous year, and slightly above the consensus estimate [2] - Total revenues reached $1.5 billion, surpassing the consensus estimate by a small margin and reflecting a 4.8% year-over-year growth [2] - Revenue from the Management Solutions segment increased by 5% year over year to $1.1 million, meeting expectations [5] - Professional employer organization (PEO) and Insurance Solutions revenues were $365.4 million, up 6% from the previous year, but fell short of the expected $372.6 million [5] - Service revenues grew by 5% year over year to $1.5 billion, aligning with projections [6] - Interest on funds held for clients decreased by 2% year over year to $42.9 million, exceeding the forecast of $38.4 million [6] - EBITDA was reported at $734.9 million, a 6% increase from the previous year, but below the expected $755.1 million [6] - Operating income rose by 6% year over year to $691.8 million, missing the projection of $707.6 million [6] - The operating margin improved to 45.8%, up 70 basis points from the previous year, surpassing the estimate of 42.8% [6] Balance Sheet & Cash Flow - At the end of the third quarter, cash and cash equivalents stood at $1.6 billion, up from $1.2 billion in the previous quarter [7] - Long-term debt was reported at $799 million, slightly higher than $798.9 million in the second quarter [7] - Cash generated from operating activities amounted to $716 million, with capital expenditures totaling $48.7 million [8] Guidance - For fiscal 2025, Paychex anticipates interest on funds held for clients to be between $145 million and $155 million, and other income to be between $30 million and $35 million [9]

Core Viewpoint - Paychex reported quarterly earnings of $1.49 per share, exceeding the Zacks Consensus Estimate of $1.48 per share, and showing an increase from $1.38 per share a year ago, indicating a positive earnings surprise of 0.68% [1] Financial Performance - The company achieved revenues of $1.51 billion for the quarter ended February 2025, surpassing the Zacks Consensus Estimate by 0.03% and up from $1.44 billion year-over-year [2] - Over the last four quarters, Paychex has consistently surpassed consensus EPS estimates four times and topped revenue estimates three times [2] Stock Performance - Paychex shares have increased approximately 2.8% since the beginning of the year, contrasting with the S&P 500's decline of -1.8% [3] Future Outlook - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is $1.21 on revenues of $1.37 billion, and for the current fiscal year, it is $4.99 on revenues of $5.52 billion [7] Industry Context - The Internet - Software industry, to which Paychex belongs, is currently ranked in the top 32% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]

Paychex (PAYX) Q3 2025 Earnings Call March 26, 2025 09:30 AM ET Company Participants Bob Schrader - CFO & Member of the Executive CommitteeJohn Gibson - President and Chief Executive OfficerDaniel Maxwell - Equity Research AssociatePeter Christiansen - DirectorRamsey El-Assal - Managing DirectorJames Faucette - Managing DirectorWilliam Chi - Head, Credit - Large Commercial BankingKartik Mehta - Executive MD & Director of ResearchSamad Samana - Managing DirectorScott Wurtzel - SVP - Equity Research Conferenc ...

Paychex (PAYX) Q3 2025 Earnings Call March 26, 2025 09:30 AM ET Company Participants Bob Schrader - CFO & Member of the Executive CommitteeJohn Gibson - President and Chief Executive OfficerDaniel Maxwell - Equity Research AssociatePeter Christiansen - DirectorRamsey El-Assal - Managing DirectorJames Faucette - Managing DirectorWilliam Chi - Head, Credit - Large Commercial BankingKartik Mehta - Executive MD & Director of ResearchSamad Samana - Managing DirectorScott Wurtzel - SVP - Equity Research Conferenc ...

Financial Performance - Total revenue for the third quarter increased to $1.5 billion, representing a growth of 5% compared to the prior year[2] - Operating income grew 6% to $691.8 million, with an adjusted operating income increase of 9% to $708.5 million[5] - Diluted earnings per share increased 4% to $1.43, while adjusted diluted earnings per share rose 8% to $1.49[7] - Management Solutions revenue increased 5% to $1.1 billion, driven by growth in clients and higher revenue per client[9] - Total revenue for the three months ended February 28, 2025, was $1,509.0 million, a 5% increase from $1,439.3 million in the same period last year[23] - Management Solutions revenue grew by 5% to $1,100.7 million, while PEO and Insurance Solutions revenue increased by 6% to $365.4 million for the three months ended February 28, 2025[23] - Net income for the three months ended February 28, 2025, was $519.3 million, reflecting a 4% increase from $498.6 million in the prior year[23] - Basic earnings per share for the three months ended February 28, 2025, was $1.44, up 4% from $1.39 in the same period last year[23] - Net income for the nine months ended February 28, 2025, was $1,360.1 million, compared to $1,310.5 million for the same period in 2024, reflecting a growth of 3.8%[28] Expenses and Margins - Total expenses for the third quarter increased 4% to $817.2 million, primarily due to acquisition-related costs[4] - Operating margin for the third quarter was 45.8%, up from 45.1% in the prior year, while adjusted operating margin was 46.9%[5] - Adjusted operating margin is anticipated to be approximately 43% for fiscal 2025[16] Cash Flow and Returns - Cash flow from operations was $1.6 billion for the nine months ended February 28, 2025[10] - The company returned $1.2 billion to stockholders in the first nine months of fiscal 2025[3] - Net cash provided by operating activities for the nine months ended February 28, 2025, was $1,557.1 million, down from $1,676.0 million in the prior year, a decrease of 7.1%[28] - Dividends paid amounted to $1,059.2 million for the nine months ended February 28, 2025, compared to $962.5 million in the same period of 2024, an increase of 10.0%[28] Assets and Equity - Total assets increased to $11,221.6 million as of February 28, 2025, up from $10,383.1 million on May 31, 2024, representing an increase of 8.1%[26] - Cash and cash equivalents rose to $1,563.8 million as of February 28, 2025, compared to $1,468.9 million on May 31, 2024, an increase of 6.5%[26] - Total stockholders' equity increased to $4,116.6 million as of February 28, 2025, from $3,801.0 million on May 31, 2024, marking a growth of 8.3%[26] - Total current assets reached $8,077.0 million as of February 28, 2025, up from $7,251.5 million on May 31, 2024, an increase of 11.4%[26] Client Obligations and Investments - Client fund obligations increased to $4,251.8 million as of February 28, 2025, compared to $3,868.7 million on May 31, 2024, an increase of 9.9%[26] - The company reported a net cash used in investing activities of $281.7 million for the nine months ended February 28, 2025, compared to $117.8 million in the prior year[28] Acquisitions and Future Expectations - The company expects to close the acquisition of Paycor HCM, Inc. in April 2025, which is anticipated to enhance its customer base to nearly 800,000[3] - The pending acquisition of Paycor is expected to close in April 2025, which aims to enhance the company's HR technology and advisory solutions[13] - The company expects PEO and Insurance Solutions revenue to grow in the range of 6.0% to 6.5% for fiscal 2025[16] Tax and Regulatory - The effective income tax rate was 24.3% for the third quarter, slightly down from 24.4% in the prior year[7] - The company anticipates filing its Form 10-Q for the third quarter within the next couple of days[14] Other Income - Other (expense)/income, net, for the three months ended February 28, 2025, was $(6.0) million, compared to $9.4 million in the same period last year, indicating significant variability[23] Borrowings - Long-term borrowings remained stable at $799.0 million as of February 28, 2025, compared to $798.6 million on May 31, 2024[26]

Financial Results - Paychex, Inc. is set to release its third-quarter financial results on March 26, with expected earnings of $1.48 per share, an increase from $1.38 per share in the same period last year [1] - The company projects quarterly revenue of $1.51 billion, compared to $1.44 billion a year earlier [1] Analyst Ratings - UBS analyst Kevin Mcveigh maintained a Neutral rating for Paychex and raised the price target from $152 to $155 [2] - Barclays analyst Ramsey El-Assal maintained an Equal-Weight rating and raised the price target from $135 to $140 [4] - RBC Capital analyst Ashish Sabadra reiterated a Sector Perform rating with a price target of $148 [4] - TD Cowen analyst Bryan Bergin maintained a Hold rating and increased the price target from $131 to $146 [4] - JP Morgan analyst Tien-Tsin Huang maintained an Underweight rating and increased the price target from $133 to $139 [4] - Citigroup analyst Peter Christiansen reiterated a Neutral rating with a price target of $145 [4] Stock Performance - Paychex shares fell 0.5% to close at $144.13 on Tuesday [2]